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On November 20, 2018, a years-long dispute before Judge Theodore
Chuang in the District of Maryland over probiotics culminated in a
gut-wrenching $18 million jury verdict against defendant pharmaceutical
companies. The case is De Simone v. VSL Pharmaceuticals, Inc.
et al., No. 8:15-cv-01356.
The dispute involved numerous claims and counterclaims,
including both a claim and a counterclaim for false advertising
under the Lanham Act. While the advertising-related issues appeared
initially to be only a small part of the case, overshadowed by the
50-plus other claims and counterclaims asserted by the various
parties, plaintiff's false advertising claim ultimately proved
the most lucrative part of the case, making up a hearty $15 million
of the $18 million verdict.
The lawsuit was initiated by Claudio De Simone, the inventor of
the probiotic formula at issue, and ExeGi Pharma, the company
currently licensed to sell De Simone's probiotics. In 2000, De
Simone co-founded VSL Pharmaceuticals, which entered into a joint
venture with Alfasigma USA and Leadiant Biosciences to sell De
Simone's probiotic formula under the name VSL#3. De Simone
later left VSL, ended the joint venture, and began selling his
probiotic formula with ExeGi under a new name, Visbiome. De Simone
and ExeGi advertised Visbiome as the only probiotic on the market
that contains De Simone's original probiotic formula.
Meanwhile, defendants Alfasigma and Leadiant continued to sell a
probiotic formula under the VSL#3 name, and advertised that product
as being exactly the same as De Simone's original probiotic
formula. De Simone and ExeGi subsequently filed this lawsuit,
asserting a variety of claims, including breach of license
agreement, unjust enrichment, and false advertising under the
Lanham Act. Defendants responded with over fifty counterclaims,
including with their own Lanham Act false advertising claim.
At the heart of both sides' false advertising claims was the
question of whether defendants' current formula for VSL#3 was
clinically equivalent to Visbiome and to De Simone's original
formula of VSL#3 sold during the joint venture. Defendants argued
it was. Therefore, they alleged that De Simone and ExeGi engaged in
false advertising by marketing Visbiome as the only brand that
contains the original De Simone probiotic formula. On the flip
side, De Simone and ExeGi argued that defendants' current VSL#3
product was different from Visbiome and from De Simone's
original probiotic formula, and that Alfasigma and Leadient
therefore engaged in false advertising in marketing their new
version of VSL#3 as being exactly the same as De Simone's
original probiotic formula. Specifically, De Simone argued that
defendants' new version was made with cheaper, untested
ingredients, and was therefore less effective.
The jury ultimately sided with De Simone and ExeGi, finding that
the defendants' new VSL#3 product differed from De Simone's
original probiotic formula, and that Alfasigma and Leadient engaged
in false advertising in marketing their new product as identical to
De Simone's formula sold during the time of the joint venture.
The jury also found defendants liable for breach of contract and
unjust enrichment, but it was the $15 million it awarded for the
Lanham Act false advertising claim that truly made this judgment a
bitter pill for defendants to swallow . Briefing concerning damages
calculations under the Lanham Act were filed under seal, so it is
not entirely apparent how the jury arrived at this $15 million
figure, particularly for a claim that did not initially seem to be
a focal point of the case. However, certain trial briefings and
jury instructions suggest that Plaintiffs sought to disgorge
Defendants' profits that were attributable to Defendants'
false advertising of the VSL#3 product. In addition,
Defendants' motion for a new trial filed on December 19, 2018
argues that an inflamed jury improperly inflated the false
advertising damages as "quasi-punitive damages" based on
Plaintiffs' counsel's improper argument on the safety of
VSL#3, which was not at issue in the case.
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